Tuesday, December 14, 2004

Mid-day Report

S&P 500 1,200.19 +.13%
NASDAQ 2,155.47 +.32%

Leading Sectors
Broadcasting +2.01%
Semis +1.63%
Oil Service +1.42%

Lagging Sectors
Wireless -.56%
Homebuilders -.56%
Networking -1.41%

Crude Oil 41.40 +.95%
Natural Gas 7.29 +1.73%
Gold 437.40 -.66%
Base Metals 116.09 +.37%
U.S. Dollar 82.64 +.65%
10-Yr. T-note Yield 4.17% +1.31%
VIX 12.39 -1.20%
Put/Call .88 +23.94%
NYSE Arms .80 +11.11%

Market Movers
SYMC -12.1% after reports it is in advanced talks to acquire Veritas Software(VRTS) for at least $13 billion, the NY Times reported. VRTS +9.7%.
ERTS +5.6% after saying it entered into exclusive licensing relationships with the NFL and Players Inc. to develop, publish and distribute interactive football games. Competitor TTWO -5.3%.
RIMM +7.6% after a US appeals court orders new hearings in a patent infringement suit by a Virginia company.
ORNG +14.8% on strong demand for IPO.
MPS +13.2% after saying it had been selected as one of Raymond James' Analysts' Best Picks for 2005.
LNG +12.5% after completing an agreement to the rights to its Louisiana-based plant to ChevronTexaco.
PQE +11.2% after saying it will buy Voyager Expanded Learning for $360 million is cash and stock to expand its educational products.
SLAB +10.1% after Citi SmithBarney initiated it with Buy(Top Pick), target $46.
VRNT +7.4% on CIBC upgrade to Sector Outperform, target $43.
ADTN -14.7% after lowering 4Q estimates and multiple downgrades.
MSTR -10.4% after saying CFO is leaving and multiple downgrades.
AFCO -9.8% on Lehman Brothers downgrade to Equal Weight from Overweight.
JRCC -14.14% on disappointing 3Q results.
COO -7.1% on disappointing 3Q results.

Economic Data
Trade Balance for October was -$55.5B versus estimates of -$53.0B and -$50.9B in September.
Industrial Production for November rose .3% versus estimates of a .2% increase and a .6% gain in October.
Capacity Utilization for November fell to 77.6% versus estimates of 77.8% and 77.5% in October.

-Goldman Sachs reiterated Outperform on NKE, FON and SYMC.
-Citi SmithBarney said to Buy GIS, target $51.50. Citi said to Buy ACE and STA now, targets $49 and $43, respectively. Citi reiterated Sell on OSG, target $49. Citi reiterated Buy on CSC, target $68. Citi reiterated Buy AXP, target $57. Citi reiterated By on MAY, target $35. Citi reiterated Buy on ERTS, target $67.
-Banc of America rated NWS/A to Buy, target $21. BofA rated L Buy, target $13.25. BofA rated TWX Buy, target $23.
-UBS raised KYPH to Buy, target $30.
-CIBC raised VRNT to Sector Outperform, target $43. CIBC raised ISLE to Sector Outperform, target $30. CIBC raised HLT to Sector Outperform, target $25. CIBC raised PENN to Sector Outperform, target $59. CIBC raised HOT to Sector Outperform, target $61. CIBC cut PNK to Sector Underperform, target $16. CIBC cut ASCA to Sector Underperform, target $36. CIBC cut STN to Sector Underperform, target $55. CIBC cut KZL to Sector Underperform, target $56.
-Merrill Lynch said US dollar is undervalued and Euro is overvalued. Merrill also said US bonds will perform poorly in 2005.
-Thomas Weisel raised STE to Outperform, target $29.
-Legg Mason rated CBM Buy, target $31. Legg Mason rated FSH Buy, target $73.

Mid-day News
U.S. stocks are modestly higher mid-day on a rebound in the US dollar, merger speculation and a better-than-expected industrial production report. The US restaurant business is being pushed to reduce trans fats that are often used in processed foods to improve shelf-life, taste and texture, but which have been linked to health troubles, the Wall Street Journal reported. Mergers and acquisitions worth about $1.7 trillion worldwide have been announced so far this year, compared to $1.3 trillion for all of 2003, the Wall Street Journal reported. The Bush administration will urge Congress to overhaul air quality legislation early next year, the Washington Post reported. Bear Stearns is the subject of speculation on Wall Street over whether CEO Cayne will sell the company, the NY Times reported. Lucent and Nortel, the two main wireless network-equipment suppliers to Sprint, may benefit if Sprint merges with Nextel, the NY Times said, citing analyst Susan Kalla of FBR. Iraq next week will begin war crimes trials for leaders of the former regime of ousted dictator Saddam Hussein, the AP reported. Theme parks in North America boosted attendance by 4% this year, the first increase since the 2001 terrorist attacks, the LA Times reported. Companies are spending heavily on employee monitoring software, USA Today reported. Doctors might be able to identify patients with Alzheimer's disease by using a basic scratch-and-sniff test, Reuters reported. Boeing won a $928 million US contract to develop parts and systems for a site in Huntsville, AL, that will be part of a US anti-missile system from the Missile Defense Agency, Reuters reported. Mahmoud Abbas, the interim Palestinian leader and the front-runner to win Jan. 9 leadership elections, called for an end to the Palestinian armed uprising, saying it has been counterproductive, the AP reported. About 30% of companies in Massachusetts plan to hire in the first quarter of 05 compared with 20% a year earlier, according to Manpower. ChevronTexaco increased 2005 spending by 18% from this year to boost production amid record demand for oil and natural gas, Bloomberg said. Blockbuster will stop charging late fees to compete with Netflix, Bloomberg reported. Vodafone said it's not in talks with Verizon about mounting a bid for Sprint, Bloomberg said.

Bottom Line: The Portfolio is unchanged mid-day as strength in my semi and internet longs is offsetting weakness in my software and Chinese ADR longs. I have not traded today and the Portfolio is still 125% net long. The tone of the market is ok as more stocks are advancing than declining and volume is decent. It is a positive to see the US dollar rally on the trade report. The CRB is also falling again today even with the rise in energy prices. I expect US stocks to rise modestly into the close on merger optimism, short-covering and year-end repositioning.

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